Pricing Systems Impact On Quality And Safety | EssayIvy.com

Pricing Systems Impact on Quality and Safety

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Running head: QUALITY AND SAFETY IN HEALTHCARE PRICING
Pricing Systems Impact on Quality and Safety
Student’s Name
Institutional Affiliation
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QUALITY AND SAFETY IN HEALTHCARE PRICING
Pricing Systems Impact on Quality and Safety
Over the last few decades, there has been an extensive debate on whether it is feasible
to incorporate quality and safety in the health care pricing systems. In the Australian context,
policymakers and health care providers have been keen to ensure that health care pricing
incentivizes the provision of quality services, with an equal regard to safety. To this end,
Australian administration implemented the activity based funding system which took effect
starting July 2014. Funding for Australia's public hospitals comes from the two levels of
government. Consequently, the dynamic nature if the healthcare system makes it difficult to
streamline a single pricing or funding system to the entire public health care system.
However, the following discussion will show that the characteristics of the current pricing
model in the Australia’s public health care system are evidence for the normative pricing
model.
The study by Egar et al. (2013) identified four healthcare pricing models including
payment for performance pricing,structural models of pricing quality,normative pricing
andbest-practice pricing. Of the four models, the normative pricing model is the one that is
used by the public hospitals in Australia. The idea underpinning this pricing approach is that
pricing can be used to influence the quality of health care. That is, the price levied on the
provision of a particular healthcare service should ideally incentivize quality and safety
(Eagar et al., 2013). True to the idea, the activity based funding system has inherent tendency
to incentivize quality by allowing for reduced number readmissions, providing residential
aged care services and making remote follow-ups for patients after they have been discharged.
The use of financial disincentives as an effective way to incorporate safety and quality
has also gained momentum in the Australia’s public health care system. One such structural
disincentive is the sharing of responsibilities between the Commonwealth government and the
state government (Eagar et al., 2013). While the Commonwealth government has an
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QUALITY AND SAFETY IN HEALTHCARE PRICING
obligation to fund the public health care system, it remains as a system manager with much of
the responsibility regarding service charter being at the discretion of state government.
Consequently, administrative inefficiencies are eliminated further enhancing the quality of
healthcare in the public system.
Question 2
The activity based funding model that is applied in Australia’s public health care
system provides a mechanism in which hospital funding is proportionally shared between the
Commonwealth government and state government. In this model, hospitals will receive a
fixed price from the Commonwealth government, called the national efficient price (NEP), for
each episode of care (Baxter et al., 2015). The objective is to make hospitals more efficient
and incentivize pursuit of quality and safety.
For any selected segment of the Australian population, the NEP is poised to enhance
safety and improve on quality in the provision of health care services by incentivizing
hospitals to expand the provision of profitable services. Under the model, if a health care
service offered in a hospital costs less than the fixed price paid for the activity-based model,
then the hospital will derive profit from providing the service and will consequently expand
that service (Baxter et al., 2015). However, the model has inherent perverse incentives. It
ignores the fact that not all profitable health care services produce great health gains for the
population. To that extent, the national efficient price provides incentives for services that
generate significant profits and not safety and quality.
For hospitals with higher costs for health care services that the set fixed prices, they
are likely to explore ways to increase efficiency and lower operational costs. Possible ways of
enhancing efficiency include cutting unnecessary costs, changing staffing mix, reducing
admission durations and undertaking more day surgery which is cheaper (Baxter et al., 2015).
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QUALITY AND SAFETY IN HEALTHCARE PRICING
While these measures are likely to enhance efficiency, they could become counterproductive
by compromising the quality of healthcare services.
From the preceding discussion, it is clear that to a greater extent, the national efficient
price incentivizes quality and safety in the provision of health care services. However, the
model has inherent perverse incentives that could counter the benefits. Therefore, it is
imperative to seal the loopholes that would make the advantages of the activity based funding
together with dynamic national pricing redundant.
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QUALITY AND SAFETY IN HEALTHCARE PRICING
References
Eagar, K., Sansoni, J., Loggie, C., Elsworthy, A., McNamee, J., Cook, R., &Grootemaat, P.
(2013). A Literature Review on Integrating Quality and Safety into Hospital Pricing
Systems. Centre for Health Service Development, University of Wollongong.
Australian Commission on Safety and Quality in Health Care (2013). Supplementary Briefing
and Literature Update: Integrating safety and quality into hospital pricing systems,
(2016).
Baxter, P., Hewko, S., Pfaff, K., Cleghorn, L., Cunningham, B., Elston, D., & Cummings, G.
(2015). Leaders’ experiences and perceptions implementing activity-based funding
and pay-for-performance hospital funding models: A systematic review. Health
Policy, 119(8), 1096-1110. http://dx.doi.org/10.1016/j.healthpol.2015.05.003

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